Rs 50,000 penalty imposed on firm running restaurant over mandatory service charge

It directed the restaurant to take immediate steps to modify its software generated billing system by removing default addition of service charge or charge by any other name.

A company operating a Mumbai-based restaurant was imposed a penalty of Rs 50,000 by the Central Consumer Protection Authority for including service charge by default on a bill.

The penalty was imposed on China Gate Restaurant Private Limited which operates Bora Bora restaurant.

A Mumbai resident had approached the authority with the grievance that he was charged with 10 per cent service tax amounting to Rs 624, apart from the order value and GST in April.

He claimed that when he asked for the charge to be removed, the restaurant refused. He said that he was forced to pay it and that the charge was also levied on the GST. The CCPA cited an order by the Delhi High Court in March which had upheld the applicability of its guidelines, “which is in the interest of consumers and declaring the levy of any mandatory service charge as contrary to law”.

The CCPA perused the receipt and found the complainant’s contention to be true.

“Despite Hon’ble High Court of Delhi validating the applicability of the CCPA guidelines which is in the interest of consumers and declaring the levy of any service charge by default in a bill as contrary to law and violation of the guidelines, the Restaurant has levied service charge by default in the bill,” the CCPA order passed on December 29 said.

It said that the restaurant had failed to remain present for the proceedings despite opportunity and had not furnished required information initially. Subsequently, the restaurant had made submissions before the CCPA that the levy of service charge has been discontinued with immediate effect by the restaurant. “However, from perusal of the bill attached with the grievance, it is apparent that the Restaurant had been using a software-based bill generation system whereby service charge included bills were automatically generated in the case of all the consumers from 28th March, 2025 to 30th April, 2025 which gives an implication that the restaurant must have collected a substantial amount of service charge in all its three outlets in Mumbai,” the CCPA said.